How to invest $100K

How to invest $100,000 for passive income

There are several investment options for generating passive income from your $100,000 investment. From active, hands-on approaches to automated ones, here are 5 ways for how to invest 100k:

1. Stocks or exchange-traded funds (ETFs)
2. Robo-advisors
3. Real estate investment trusts (REITs)
4. Retirement accounts
5. Alternative investments

1. Stocks or exchange-traded funds (ETFs)

Investing your 100k in individual stocks or ETFs has historically proven to be one of the most profitable options. Depending on your goals and risk tolerance, you can invest in index funds or take a risk with a small percentage of your account and consider riskier ETFs and stocks.

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How $100,000 can grow

With $100,000 you can build a diverse portfolio or add to an existing one you want to emphasize. Your money can grow dramatically long term and quickly even in shorter periods. Here’s a look at how it might grow in three common investment classes.

For this table we assumed:

• A 1% annual return on a savings account.
• An average 6% return for bonds.
• 10% on stocks, the market’s long-term annual return.

Bond returns vary widely based on bond types, and the stock market has down years while individual stocks can go to zero. So consider these benchmarks only and consider risk as well as return.

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• Get up to $300 in stocks or crypto with code FINDERUS when you sign up & fund a new account

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2. Robo-advisors

Robo-advisors are algorithms that automatically invest your money on your behalf based on parameters that you set, such as your risk tolerance. This gives you the opportunity to invest 100k in the stock market without doing tons of research.

3. Real estate investment trusts (REITs)

Spending your entire $100,000 on a property is a high-risk investment with no diversification. REITs solve this problem. Invest as much as you want in a REIT, but typically, the minimum is $5,000, which comes out at 5% of your $100,000.

4. Retirement accounts

No matter your age, you should contribute to your retirement account until the time comes to reap the benefits. Assuming you already maxed out your 401(k), you can now max out your IRA account. The maximum contribution for an IRA in 2023 is $6,500 — or $7,500 if you’re 50 or older. An IRA offers a higher variety of investment options than a 401(k).

5. Alternative investments

Alternative investments, such as non-fungible tokens (NFTs), historic works of art, collectibles and more, are another way of diversifying your portfolio. However, these assets typically come with high risk and high rewards.

• Public.com is a trading platform that lets you invest in crypto, NFTs, fine art and collectibles. All you have to do is buy shares of these assets like you would buy company shares on a stock exchange. What’s more, you can buy fractional shares if you don’t want to invest a larger amount.
• Hedonova offers one fund that holds assets, including crypto, NFTs, works of art, p2p lending, pre-IPO startups like SpaceX and OpenSea, music royalties and more. You need to pass a KYC and deposit a minimum of $5,000 to start investing.
• Masterworks acquires art and securitizes it to create shares available to investors, which lets you invest without holding or storing the physical asset itself. Multiple investors can own shares of the same work of art. To start, you need to invest a minimum of $15,000.

How to invest $100,000 to make $1 million

This strategy requires a similar approach as for passive income, but your goal should be long-term. This means you invest your 100k in the same assets but hold them for 20 years or more to reach $1 million.

An alternative approach is to invest in riskier assets and stocks. Blue chip stocks are typically the largest companies with a strong balance sheet but are unlikely to appreciate 10 times in a short period.

Small-cap companies can either be bought by larger companies — often at a higher price than the market price — or grow to become large-cap companies if they offer great and competitive products or services. Finding such companies requires a good amount of research, though.

Before you invest: Determine your investment goals

Before you figure out where to invest 100k, it’s important to have a goal in sight.

Investors who want a hands-off approach to investing with minimal intervention would find robo-advisors a decent option. These computer algorithms trade on your behalf and continuously rebalance your portfolio for a minimal annual fee.

Investors who prefer to do the work themselves are likely better off with individual stocks and ETFs, including real estate investment trusts (REITs) — a great option for investors regardless of their risk tolerance.

Bottom line

• You can invest your $100,000 in a variety of ways, including in the stock market and in real estate, or you can let a robo-advisor manage your portfolio.
• Typically, the best way to invest your funds is to diversify between multiple assets.
• Each investment option comes with its own pros and cons.

Frequently asked questions

• What should I invest $100k in right now?

  Consider maxing out your retirement account if you haven’t already. Alternatively, you can invest in stocks, ETFs, REITs or you can let a robo-advisor manage and rebalance your portfolio.

• How can I invest $100k to make passive income?

  You can get passive income by investing in dividend stocks and ETFs or by investing in REITs.

  You can get a dividend yield of up to 6% annually with some blue chip stocks like AT&T (T), or you can get more than 10% annually in riskier stocks.

• How much interest will $100k earn in a year?

  This largely depends on where you invest. Dividend stocks can get you between 3% and 6% annually.

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